Is $2 Million Still Enough to Retire on in the U.S.?

If you have $2 million in your retirement nest egg, you have considerably more money than most people have saved for their future. You may think that with multiple seven figures saved that you can walk into work tomorrow to tell your boss you’re done and you’re ready to live a life of leisure as a retiree. 

However, that is actually not necessarily the case at all. In fact, while $2 million may be plenty for some people to retire, it is not nearly enough for others. That’s because your retirement nest egg needs to be large enough to support your own income needs — and $2 million doesn’t really provide as much income as you’d think. 

Are you ready to retire with $2 million?

The number one question to answer to decide if you’re ready to retire with $2 million is whether or not that nest egg is going to give you the income that you’re looking for as a retiree.  While you may have $2 million, you obviously can’t just spend all that money at once. You need it to last for the entire rest of your retirement — and that may be a very long time, depending on how young you are. 

For most people, a safe withdrawal rate is around 3.7%, so that would mean that $2 million invested would provide $74,000 in annual income. That’s a good amount of money — but whether it is sufficient to support you in your retirement is going to depend on the lifestyle you are used to.

If you were making $400K or $500K a year and are used to being able to spend on whatever you want, then going down to an income of $74K is going to be a huge shock and probably an unacceptable lifestyle change. If you were making $80K a year and your nest egg can provide $74,000, then you’re probably good to go ahead and retire. 

You’ll have to think about what extra costs retirement is going to impose, though. For example, if you got health insurance from your company and suddenly you are responsible for insuring your family of four on the individual market, then you need to add tens of thousands of dollars to the projections for how much you are going to have to spend as a retiree. 

The lower your spending needs, the easier it is to retire with $2 million

Ultimately, you may end up having a choice to make if you are trying to decide whether or not $2 million is enough to retire.

You’ll have to decide if you want to be frugal enough to make that work or if it is more important to you to be able to truly enjoy your senior years without financial worries — in which case you’ll need to work longer in order to build a nest egg that’s going to provide a lot more than $74K per year to live on.  

A financial advisor can help you calculate how much your dream retirement is likely to cost you and how long you would have to work to make that happen. That way, you can decide how many more years of your life you want to keep working to enable a more lavish retirement or whether you think the $2 million nest egg is going to be good enough. 

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